MOBIL OIL CORPORATION v. LOCAL BOUNDARY COMMISSION

OPINION

ERWIN, Justice.

This appeal challenges administrative actions by the Local Boundary Commission and the Local Affairs Agency1 in connection with incorporation of the North Slope Borough.

On April 6, 1971, a petition for incorporation of a first class organized borough was submitted to the Local Affairs Agency by the Arctic Slope Native Association.2 The petition proposed creation of a North Slope Borough reaching from the Bering Straits below Point Hope eastward to the Canadian border and from the Brooks Range north to the Arctic shore. Within these 87,500 square miles lie the cities of Barrow, Point Hope, Wainwright, Kaktovik and Anaktuvuk Pass, a total population of less than four thousand, and the oil fields and associated development camps near Prudhoe Bay.

Upon receipt of the petition and pursuant to its duties under AS 07.10.060-.090,3 the Local Affairs Agency reviewed the petition for proper form and number of signatures4 and undertook an investigation of its compliance with certain standards for incorporation, composition and apportionment of the borough assembly, and areawide powers set out in AS 07.10.030.050. The agency submitted a report on its inquiries to the Local Boundary Commission.

The Commission, pursuant to AS 07.10.100.110,5 commenced an additional investigation. A mandatory hearing was held at Barrow on December 2, 1971, to elicit public comment. On February 23, 24 and 25, 1972, the Commission held a public meeting in Anchorage, heard additional comment, and accepted the petition.6 This was noticed to the Lieutenant Governor in a document dated February 25, 1972. And on March 28, 1972, a group of eleven corporations and individuals filed the petition for judicial review which has led to this appeal.7

These corporations and individuals are holders of surface leases and owners of interests in oil and gas wells and other real and personal property in the area of Prudhoe Bay. In the superior court, they sought a declaratory judgment against the Local Boundary Commission, the Lieutenant Governor and the state holding the incorporation invalid. The five incorporated cities within the borough, two residents of the area, the Arctic Slope Native Association and the North Slope Borough were permitted to intervene as defendants. After motions for summary judgment by all parties were denied, the superior court upheld acceptance of the petition, finding, inter alia, that the investigations of the Local Affairs Agency and the Local Boundary Commission were consistent with procedural due process, that inclusion of the plaintiffs' property within the borough did not deny substantive due process, and that the evidence assembled gave substantial ssupport to the Commission's action. The defendants were awarded $20,000.00 attorneys' fees. From the judgment affirming the Commission and the order awarding attorneys' fees, all plaintiffs below appeal.

The property owners challenge the procedures of the administrative agencies, the scope of review applied by the superior court and the adequacy of the evidence supporting organization of the North Slope Borough. They raise the following arguments: (1) the Local Boundary Commission did not produce required findings of fact; (2) the superior court should not have deferred to the Commission's interpretation of the statutory criteria for incorporation; (3) acceptance of the borough petition was not supported by substantial evidence; (4) inclusion of the plaintiffs' property within the borough denied them substantive due process; (5) the accepted incorporation petition should have been submitted to the legislature; and (6) attorneys' fees should not have been awarded to the prevailing parties.

I. FINDINGS OF FACT

AS 07.10.110 permits judicial review of the Commission's acceptance of an incorporation petition "in the manner and within the scope of review prescribed by Sections 24 and 25, Ch. 2, of the Administrative Procedure Act (AS 44.62)." We do not accept appellants' contention that this language, read together with AS 44.62.510,8 creates an obligation on the part of the Local Boundary Commission to make findings of fact. The sections of the Administrative Procedure Act invoked are 44.62.560-44.62.5709 which prescribe the manner and scope of judicial review but do not address the form of the agency's determinations. The latter was set out in AS 07.10.110 without imposition of a duty to produce findings. If these were to be required by the Administrative Procedure Act, the obligation could be expected to have been imposed in the same manner as it has been placed upon other agencies; that is, by listing the Local Boundary Commission among the administrative bodies subjected by AS 44.62.330(a) to certain procedural requirements, including the duty in AS 44.62.510 to prepare written findings of fact, or by expressly imposing such a duty in a statute relating to the Commission.10 The Local Boundary Commission is not named, nor does any part of Title 7 require findings. Given this framework, we find no statutory command that findings of fact accompany acceptance of a petition for borough incorporation.

The special function of the Commission, to undertake a broad inquiry into the desirability of creating a political subdivision of the state, makes us reluctant to impose an independent judicial requirement that findings be prepared.11 From our own review of the entire record of this controversy, we have been able to determine the basis of the Commission's decision,12 and we have concluded that its proceedings and review by the superior court have been consistent with sound principles of administrative law.

II. SCOPE OF REVIEW

Appellants attack the scope of the superior court's review of the Commission's action, contending that the court accorded undue deference to the Commission when it declined to undertake independent interpretation of the standards for incorporation.13 We disagree. Recent cases have established that where administrative action involves formulation of fundamental policy, the appropriate standard on review is whether the agency action has a reasonable basis. Swindel v. Kelly, 499 P.2d 291, 298 (Alaska 1972); Kelly v. Zamarello, 486 P.2d 906, 911 (Alaska 1971); Pan American Petroleum Corporation v. Shell Oil Company, 455 P.2d 12, 21-23 (Alaska 1969). A determination whether an area is cohesive and prosperous enough for local self-government involves broad judgments of political and social policy. The standards for incorporation set out in AS 07.10.030 were intended to be flexibly applied to a wide range of regional conditions. This is evident from such terms as "large enough", "stable enough", "conform generally", "all areas necessary and proper", "necessary or desirable", "adequate level" and the like. The borough concept was incorporated into our constitution in the belief that one unit of local government could be successfully adapted to both urban and sparsely populated areas of Alaska,14 and the Local Boundary Commission has been given a broad power to decide in the unique circumstances presented by each petition whether borough government is appropriate. Necessarily, this is an exercise of delegated legislative authority to reach basic policy decisions. Accordingly, acceptance of the incorporation petition should be affirmed if we perceive in the record a reasonable basis of support for the Commission's reading of the standards and its evaluation of the evidence.

The appellants argue that neither the geography nor the transportation standard is satisfied by the record evidence. Our review of the record has been undertaken in light of the statement of purpose accompanying article X, the local government article, of the Alaska constitution. Section 1 declares in part:

We read this to favor upholding organization of boroughs by the Local Boundary Commission whenever the requirements for incorporation have been minimally met.

The geography standard, AS 07.10.030(2), provided that borough boundaries are to "conform generally to the natural geography of the area" and "include all areas necessary and proper for the full development of integrated local government services." However, "all areas such as military reservations, glaciers, ice caps, and uninhabited and unused lands" are to be excluded "unless such areas are necessary or desirable for integrated local government." The property owners point out that the borough encompasses Naval Petroleum Reserve No. 415 and argue that its inclusion cannot be justified as "necessary or desirable for integrated local government" because the Reserve is within the exclusive jurisdiction of the federal government leaving the borough powerless to regulate its use. In re Long's Petition, 200 F.Supp. 313 (D. Alaska 1961), leads us to a contrary conclusion. On a petition for a writ of habeas corpus, the district court was required to decide whether an alleged burglary committed within the boundaries of Naval Petroleum Reserve No. 4 could be prosecuted under Alaska law. Following a thorough review of the original order creating the Reserve,16 the Alaska Statehood Act and its legislative history,17 the court concluded that the state had been granted concurrent jurisdiction over the Reserve until Congress enacts legislation to the contrary.18 We accept this reading as sound and see no impediment to the state's partial delegation of its concurrent authority to a political subdivision. This question of jurisdiction aside, the superior court properly concluded that the record evidence of the Reserve's importance to the subsistence lifestyle of area residents showed inclusion of the tract to be desirable for integrated local government so that it might fall within the new borough's planning and zoning power. This reasonably satisfies the geography standard.

We are also satisfied that the transportation standard has been reasonably met. The dispute surrounds the language of AS 07.10.030(4):

Regular travel among borough communities is available only by charter aircraft. Surface transportation is limited to dog teams and snowmachines. Even at this stage of development, we agree with the superior court that the Commission could reasonably have found travel facilities adequate to support borough government when present and future capacity is considered in the context of transportation in Alaska generally and compared to the present cost and availability of travel to centers of government which affect the lives of North Slope residents.

III. SUBSTANTIVE DUE PROCESS

By concluding that the Commission's application of the geography and transportation standards was reasonable, we reach the contention that inclusion of the plaintiff's property at Prudhoe Bay within the North Slope Borough is a denial of substantive due process. In support of this proposition, the property owners offer a series of cases striking down municipal annexations and incorporations where the lands taken have been found to receive no benefit.19 We find this authority unpersuasive when applied to borough incorporation. In most of these cases, the courts inferred from statutes or state constitutions what has been called a "limitation of community"20 which requires that the area taken into a municipality be urban or semi-urban in character.

The limitation has been found implicit in words like "city" or "town" in statutes and constitutions22 or inferred from a general public policy of encouraging mining or agriculture.23 In other cases, the limitation has been expressed as a finding that the land taken is not susceptible to urban municipal uses.24 The result in these cases was determined not by a test of due process but by restrictions in pertinent statutes and constitutions on the reach of municipal annexations and incorporations.

Aside from the standards for incorporation in AS 07.10.030, there are no limitations in Alaska law on the organization of borough governments. Our constitution encourages their creation. Alaska const. art. X, § 1. And boroughs are not restricted to the form and function of municipalities. They are meant to provide local government for regions as well as localities and encompass lands with no present municipal use.25 For these reasons, the municipal cases relied upon by the property owners are poor guides to resolving whether organization of an Alaskan borough violates substantive due process.

Appellants also direct us to Myles Salt Co., Ltd. v. Board of Commissioners, 239 U.S. 478, 36 S.Ct. 204, 60 L.Ed. 392 (1916), which found creation of a drainage district to violate due process in the absence of a benefit to property within its boundaries; but the case is of limited application to this appeal. It involved a Louisiana landowner's objection to taxes levied to protect lands within the drainage district from tidal overflows. Myles Salt Company owned an island with the highest uniform elevation in southwest Louisiana, so that it suffered erosion and excessive drainage but not flooding. Taking the allegations of the company as true, the Supreme Court held that forced payment of assessments for drainage which would never benefit Myles Salt Company would constitute a denial of due process.

We feel three characteristics of this case warrant our attention. The question of law upon which the case turned was whether organization of the drainage district was "palpably arbitrary and a plain abuse" of the state's broad power to create special service districts.26 We agree that the test of substantive due process is whether the action of the legislature must be said to be arbitrary.27 Judicial concern for whether a statute comports with substantive due process goes no farther than a perception that the act furthers a legitimate governmental purpose. The question of benefit is not irrelevant, but it is only a part of the more general inquiry into arbitrariness. Because Myles Salt came before the Supreme Court on appeal from a dismissal for failure to state a cause of action, whether the district's boundaries were arbitrary turned upon only the allegations of the complaint. This narrowed the court's inquiry to benefit from drainage alone; other reasons for creating the district were disregarded.

Moreover, the entity under attack was a drainage district and not a unit of government.

As exampled below, there may be acceptable public purposes which justify creation of a body of government but do not confer a felt benefit upon particular property owners. The lesson of Myles Salt which survives generalization from its particular facts to this appeal is only the familiar principle that the legislature may not act arbitrarily.

We can perceive why the legislature might authorize organization of a North Slope borough. As an example, private developers at Prudhoe Bay may gear their investments in the design and construction of camps, roads, airports and the like for a maximum return over the projected life of the surrounding oil fields. The state, on the other hand, may prefer development of the surface with a view to its long-run utility as a permanent arctic community. Need for the state to oversee the course of private development could be met by a local government body which promulgates and enforces planning and zoning regulations.30

The uncontested ability of the property owners to supply many of the services which the North Slope Borough is empowered to provide is not relevant to the question of due process. Judicial inquiry does not reach whether incorporation is desirable. The state may reasonably conclude that private development interests do not align with the public interest, that the economic motivating co-ordinated development may evolve in time to favor independent action by the property owners, and that, for example, an active planning and zoning authority in the form of a borough would assure that private agreements and intentions do not waiver and development diverge from the long-range interests of North Slope residents and the state.

IV. APPROVAL OF THE PETITION BY THE LEGISLATURE

The property owners also argue that the accepted incorporation petition should have been submitted by the Local Boundary Commission to the legislature. They contend this course is required by article X, section 12 of the Alaska constitution which provides:

Organization of a borough involves a boundary change, in their view, because the entire state is divided into several organized and one residual unorganized borough.31 Creation of an organized borough necessarily changes the boundaries of the unorganized borough. They then read the language of section 12 to confer upon the Local Boundary Commission power to consider the incorporation petitions but not to approve them without submission to the legislature. Supporters of the borough respond by asserting that the power to create boroughs derives from section 3 of article X. This provides:

The borough's supporters assert that because the legislature delegated the power of incorporation to the Local Boundary Commission through Title 7 without reserving any power of review the Commission's decision need not be submitted to the legislature. We agree. Section 3 vests in the legislature power to prescribe procedures for borough incorporation without restriction. The framework of Title 7 and the past conduct of the Local Boundary Commission persuade us that both the legislature and the agency charged with organizing boroughs have adopted this construction. The only legislative reservation in Title 7 was addressed to adjustments made by the Commission in boundaries of organized boroughs.32 By its term, AS 07.10.020 did not apply to the act of incorporation. It required a local election on the question of borough organization after acceptance of the petition by the Local Boundary Commission and provided that, upon certification of a majority of votes in favor of organization, the Lieutenant Governor "shall declare that the area ... is an organized borough".33 No duty to seek or await legislative approval of the petition was interposed.34

Aside from the powers granted by article X, section 3, the weakness of appellants' argument that section 12 requires submission of the accepted incorporation petition to the legislature lies in their equation of the boundary changes contemplated by section 12 with the unavoidable diminution of the residual unorganized borough whenever a functioning borough government is created. Oesau v. City of Dillingham, 439 P.2d 180, 183-184 (Alaska 1968), established that

In this appeal, the superior court correctly determined that this policy does not reach creation of an organized borough from the nonfunctioning unorganized borough. The court observed:

Carving a new unit of government from the unorganized borough generates no controversy between governments with competing economic and political interests. The conflicts accompanying boundary adjustments between two functioning governments which must be submitted to the legislature under section 12 do not afflict mere incorporation.

Nor is the constitutional history to which we are directed by the property owners persuasive. The single relevant ramark is ambiguous and inconclusive on this point. In the debate on adoption of article X before the full convention, Delegate Doogan commented:

Mention of agreements between two existing local governments to adjust mutual boundaries vitiates whatever force the board references in the debate to "all cases" might have in resolving whether incorporation petitions must be submitted to the legislature. The convention simply did not address the question. Accordingly, we adopt the view of the superior court, the legislature and the Local Boundary Commission and hold that submission of an accepted incorporation petition to the legislature is not required by the state constitution.

V. ATTORNEYS' FEES

Finally, the property owners contend that the superior court's award of $20,000 attorneys' fees to the prevailing parties was improper. Such award is permitted by Alaska Rule of Civil Procedure 82(a) and will not be set aside absent an abuse of discretion.37 Appellants ask that we declare the award in this case to be an abuse of discretion as a matter of law because the public interest is involved. Their argument relies on the premise that fear of incurring this expense will deter a citizen from litigating questions of general interest to the community. Because the sums at stake in this controversy are large enough to prompt a suit without consideration of the public interest, the superior court could have concluded that the property owners were acting in their private interests and not in behalf of the public. Under the circumstances, we decline to hold that the award of attorneys' fees in this case amounted to an abuse of discretion.

The decision of the superior court is affirmed.

BOOCHEVER, J., not participating.